The First Intermediate People's Court of Hainan Province

Civil Ruling

(2019) Q-96-H-B-No.1-I

Applicant for Reconsideration: Ciming Boao International Healthcare (formerly known as Hainan Boao Ciming Oya Hospital Co., Ltd.), having its domicile at Room 308, No. 107, Haibin Street, Boao Town, Qionghai City, Hainan Province.

Legal representative: Guo Lei, executive director of the Company.

Attorney: Huang Wei, a staff of the Company

Attorney: Zhang Guanglei, a lawyer of Jingtian & Gongcheng Law Firm.

Respondent: Hainan Huntington Hospital Management Consulting Co., Ltd., having its domicile at Room 201, No. 107, Haibin Street, Boao Town, Qionghai City, Hainan Province.

Legal representative: John Gorden Wilcox

Attorney: Zhang Yi, a lawyer of Llinks Law Offices.

Attorney: Liu Yang, a lawyer of Llinks Law Offices. 

This Court made a civil order for preservation of conduct numbered (2019) Q-96-H-B-No.1 on December 27, 2019, which was refused to obey by Ciming Boao International Healthcare (hereinafter referred to as “Ciming Hospital”), then Ciming Hospital filed an application for reconsideration with this Court on December 31, 2019.

Ciming Hospital reconsidered that on September 10, 2017, Ciming Hospital concluded the Cooperation Agreement with Hainan Huntington Hospital Management Consulting Co., Ltd. (hereinafter referred to as “Huntington Company”), HRC-Hainan Holding Company, LLC and D&W Holding Company, LLC, agreeing that the parties would cooperate in the operation of the IVF Center, Ciming Hospital. The purpose of Ciming Hospital to enter into the Cooperation Agreement was to put the IVF Center into operation as soon as possible and build it into a top-level assisted reproductive center in China. Accordingly, the overall competitiveness of Ciming Hospital could be improved, thereby obtaining expected economic benefits. The Cooperation Agreement prescribes that Huntington Company shall be fully responsible for the operation and management of the IVF Center, and the ownership of the medical equipment of the IVF Center shall be possessed by Huntington Company, provided, however, that the right shall be subject to the condition that Huntington Company observes the provisions, and performs the obligations, of the Cooperation Agreement. In fact, the Huntington Company unilaterally breached the contract and withdrew from the IVF Center in June 2018, which resulted in that the preparation and construction of the IVF Center were bogged down, and brought in significant economic losses to Ciming Hospital. In this case, Ciming Hospital was entitled to operate IVF on its own center, for the purpose of ensuring that the IVF Center could enter trial operation in accordance with the requirements approved by the Hainan Provincial Health Commission, achieving the purpose of the Cooperation Agreement and reducing the losses suffered due to Huntington Company's breach of contract.

In the arbitration case hearing (X20191492) of the China International Economic and Trade Arbitration Commission (hereinafter referred to as “CIETAC”), Huntington Company admitted the fact that it had withdrawn from the IVF Center in June 2018, but failed to provide reasons for its withdrawal. In this regard, Ciming Hospital submitted sufficient evidence to the Arbitration Tribunal to prove that the real reason for the sudden withdrawal of Huntington Company from the IVF Center was that Dr. John G.Wilcox undertook to Jinxin Fertility Group Limited (hereinafter referred to as “Jinxin Company”) that he would not assume any office in the IVF Center of Ciming Hospital, in order to obtain the listed stocks of Jinxin Company and take a post in Jinxin Company. Huntington Company, represented by the team of Dr. John G. Wilcox, had to withdraw from Ciming Hospital in order not to violate this commitment and obtain huge benefits from the listing of Jinxin Company. The Arbitration Commission has not yet made an arbitration award on the case, but Ciming Hospital argued that the Arbitration Commission would firmly believe that Huntington Company constituted a breach of contract. In such a case, if, pursuant to the ruling of your court, Ciming Hospital shall not use the medical equipment of the IVF Center or accept any new patients in addition to the medical equipment of the IVF Center used for preserving sperm and eggs that have been extracted and cultivating embryos, this is nothing else but causing Ciming Hospital to suffer further damage due to Huntington Company’s breach of contract. Also, Ciming Hospital’s compliance with the clear requirements for trial operation proposed by the Hainan Provincial Health Commission will be seriously affected. Such damages will be difficult to be remedied by the relief procedures based on preservation errors. Hence, the behavior preservation will cause irreversible damage to Ciming Hospital as the observant party. On the contrary, even we assume that the Arbitration Commission finally believes that Ciming Hospital constituted a breach of contract, given that Huntington Company has withdrawn from the IVF Center, and the parties have made consistent expression of will in terms of the termination of the Cooperation Agreement through arbitration of this request and counterclaim, Huntington has been unable to continue operating its The IVF Center in partnership with Ciming Hospital. The IVF Center is a subordinate department of Ciming Hospital; in this respect, relevant national laws and regulations clearly prohibit third parties from independently contracting any departments of hospitals. Therefore, the IVF Center can only be operated unilaterally by Ciming Hospital after the Cooperation Agreement is released. On account of this, your hospital shall have no reason to rule that Ciming Hospital shall neither continue to use medical equipment nor accept any new patients.

In the application for arbitration of Huntington Company, it asked Ciming Hospital to return the funds it invested and compensate for its alleged economic losses. These requests already contained the procurement payments invested by Huntington Company to purchase the medical equipment of the IVF Center of Ciming Hospital. Meanwhile, Huntington Company claimed the ownership of the medical equipment involved in the Case belonged to it and shall be returned. Both arbitration claims were obviously contradictory and could not be approved at the same time. We assume that the Arbitration Commission will determine in the future that Huntington Company’s arbitration claim for the return of investment funds and compensation for losses are established, it can no longer claim the ownership and return of the medical equipment involved herein, and Ciming Hospital, as the owner, has the right of course to continue to use the medical equipment in question and to carry out diagnostic and therapeutic activities. We assume that in the future, the Arbitration Commission determines that Huntington Company shall have the ownership of the medical equipment involved herein, the normal use of Ciming Hospital will not cause any damage to the medical equipment involved in the case. More than that, Ciming Hospital will also carry out necessary routine maintenance for the equipment in order to ensure the normal operation of The IVF Center. To say the least, even if Ciming Hospital caused any damage when using the medical equipment involved in the case, Huntington Company could still make claims for compensation, without affecting its substantive rights in any way. Based on the above discussions, the continuous use of medical equipment by Ciming Hospital will not have any impact on the interests of Huntington Company. In addition, Huntington Company has previously filed an application for property preservation with your court, requesting your hospital to seal the bank account of Ciming Hospital and the medical equipment involved in the IVF Center Case. Upon investigation and review of your court, your court has made a civil ruling (2019) Q-96-C-B-No.13-I on such an application, ruling that Ciming Hospital could use related medical equipment within the scope of normal medical activities. The ruling is not only conformity with the law, but also consistent with basic principles of protecting the rights of both parties hereto from damages and the normal operation of Ciming Hospital in this case.

In conclusion, judging from both the uncertainty of arbitration award or the interests of both Huntington Company and Ciming Hospital, it is unnecessary to rule that Ciming Hospital shall stop using the medical equipment of the IVF Center and not accept any new patients. The behavior preservation application filed by Huntington Company is absent of legal and factual basis. It abused preservation procedures and interfered with the normal operation of Ciming Hospital, with a view to forcing Ciming Hospital to satisfy its unreasonable demands. Such abuse of judicial procedures is a distortion of the facts; also, it is a disrespect for the Court and irresponsibility for patients. Your court is hereby obtested to revoke the (2019) Q-96-C-B-No.13 Ruling and rule to reject all applications of Huntington Company.

Finally, it is particularly important to note that the reason for your court’s behavior preservation ruling is that the medical equipment of the IVF Center is the subject matter of the Case. However, “using the medical equipment of the IVF Center” and “continuous acceptance of new patients” are not the same without necessary connection between the two. In other words, Ciming Hospital may still accept new patients if it does not use the medical equipment of the IVF Center. New patients may put forward different needs. The diagnosis and treatment of some patients can be completed without the medical equipment involved herein. If necessary, Ciming Hospital can purchase new equipment to complete necessary diagnosis and treatment activities thereof. It is obvious that “continuous acceptance of new patients” is a kind of right belonging to Ciming Hospital, which is not necessarily related to the subject matter of the Case. Therefore, even if your court insists that the medical equipment shall not be used for new patients as they are the subject matter of the Case, the first half of the first ruling shall be retained, i.e. “Ciming Hospital shall not use the medical equipment of The IVF Center in addition to the medical equipment of the IVF Center used for preserving sperm and eggs that have been extracted and cultivating embryos”. But the second part that “the IVF Center of Ciming Hospital shall not accept new patients” should not be a matter of behavior preservation and shall be deleted.

Upon investigation and review of this Court, in the Cooperation Agreement, the parties have made detailed agreements on specific content, manners, and time limit of the cooperative construction of the Reproductive Health and Infertility Department (which is the IVF Center for short), as well as the operation and management of the IVF Center, including: Huntington Company shall be fully responsible for the operation and management of the IVF Center, personnel management of the IVF Center. The Huntington Company shall exclusively determine the large-scale medical equipment required for the IVF Center at the cost of Huntington Company and imported by Ciming Hospital on behalf of Huntington Company. Even if the said equipment is recorded in the accounts of Ciming Hospital, such equipment shall be actually owned by Huntington Company. When the Agreement is terminated, the ownership of the equipment shall be automatically transferred from the accounts of Ciming Hospital to Huntington Company; Ciming Hospital confirms that the intellectual property rights of the IVF Center shall belong to Huntington Company. In the arbitration case, Huntington Company claimed that the medical equipment shall belong to Huntington Company. The medical equipment claimed by Huntington Company to be preserved is the subject matter of the Case, and the IVF Center is an independent department. Therefore, the suspension of use had little impact on other activities of Ciming Hospital. Prima facie evidence showed that the legitimate rights and interests of Huntington Company would be infringed by Ciming Hospital. In this sense, failure to adopt preservation measures through arbitration would cause or expand damages to the legitimate rights and interests of Huntington Company. In accordance with Article 100 of the Civil Procedure Law of the People’s Republic of China, “If it becomes impossible or difficult to execute a judgment because of the acts of one of the parties or for other reasons, the people’s court may, at the request of the other party, order that property preservation be adopted, order or prohibit it to take some actions”, Huntington Company’s claim against Ciming Hospital to stop using the medical equipment of the IVF Center has the factual and legal basis. It is hereby ruled that Ciming Hospital shall not use the medical equipment of The IVF Center in addition to the medical equipment of the IVF Center used for preserving sperm and eggs that have been extracted and cultivating embryos, for the purpose of maintaining the interests of patients, which is not inappropriate. Ciming Hospital applied for a reconsideration, claiming that it shall be permitted to continue to use the medical equipment of the IVF Center, which does not have sufficient reasons, and is hereby rejected by this Court. However, the rule of this Court that Ciming Hospital must not accept new patients is inappropriate and shall be corrected. In accordance with Article 108 of Civil Procedure Law of the People's Republic of China and Article 171 of Interpretation on Civil Procedure Law of the People's Republic of China, the ruling is as follows:

1. The second item of the civil ruling of this Court (2019) Q-96-H-B-No.1 is hereby maintained, namely: the application of the Applicant for other behavior preservation by Huntington Hospital Management Consulting Co., Ltd. is rejected;

2. The first item of the civil ruling of this Court (2019) Q-96-H-B-No.1 is changed: as of the delivery of this ruling, new patients of Ciming International Hospital Co., Ltd. shall no longer use the medical equipment of the IVF Center in addition to the medical equipment of the IVF Center used for preserving sperm and eggs that have been extracted and cultivating embryos;

3. Other reconsideration applications put forward by Boao Ciming International Hospital Co., Ltd. are hereby rejected.

This Ruling shall be executed without delay.

 

Chief judge: Zeng Fan'an

Judge: Wang Naru

Judge: Huang Shengze

 

January 9, 2020

Court Clerk: Huang Guanyong